While adoption is still in its early stages, growth is happening at a steady pace — 22% of all applications are run on the cloud, with substantial room to grow. This trend has implications for both startups and established incumbents. Using cloud technology, banks can partner with fintechs much more easily, and startups are developing as cloud native from the start.
These shifts and opportunities were under discussion at the latest panel hosted by Bloomberg’s Women in Fintech. As cloud storage becomes an integrated part of financial technology, the sophistication of features will only get more and more pronounced, as evidenced by the event’s panelists’ experiences and perspectives.
Flexibility and scalability
Cloud’s broad applications and benefits are key to how rapid adoption has become — both startups and more established institutions have much to gain from this technology, from cost savings to agility to innovation.
For big banks, enterprise migration to the cloud has streamlined workflows and simplified how they approach partnerships. As well-known institutions have been public in their adoption of cloud technology, this has encouraged more movement across the sector. Other banks are seeing these companies be able to innovate faster and work with fintechs in a more seamless way.
“Most big banks are either partnering with fintechs or competing with them,” explains Wendy Luebbe, Head of Enterprise Data & Analytics at Barclays. “We’re not an infrastructure provider. We want to focus on financial services. To do that, we move to the cloud as a strategy, focus on getting more agile with application development, work to be more competitive, and really grow our business.”
Cloud technology has real implications for startups as well, especially considering so many are establishing themselves as cloud-native from inception. By leveraging the customization that cloud offers, these companies can be increasingly nimble and scale more easily.
Kathryn Van Nuys, who works in Fintech Startup & Venture Capital Business Development at Amazon Web Services.
“The cloud has significantly lowered the barrier to entry for startups as they can launch and scale products, instantly paying for IT as they consume it, as opposed to needing to make a large upfront investment in servers and infrastructure,” Van Nuys explains. “It means teams can experiment and innovate more quickly and frequently.”
“The cloud also allows companies to innovate faster because they can focus their highly valuable IT resources on developing the applications that differentiate their business and transform customer experiences, rather than the undifferentiated heavy lifting of managing infrastructure and data centers.”
Security and privacy
As migrating data, storing data, and using additional services like machine learning on the cloud becomes more ubiquitous, there’s a clear and demonstrated need for organizational oversight. Many of the tools needed to keep data confidential and secure are readily available within public clouds, enabling firms to take advantage of better security than what is available on their local servers, if they plan appropriately.
“The reason the cloud is secure is that the security is all built in,” says Vida Ha, Director of Field Engineering at Databricks. “When using cloud storage, it’s simple to use settings to ensure all of your data is always encrypted, as opposed to doing that manually with a local server. The security features are there for you to leverage and they’re so easy to use.”
These built-in features are a critical differentiator for cloud technology, and can exist in tandem with a company’s efforts to protect sensitive information.
“We want to be strategic in how we centralize and master our data,” says Luebbe. “All those things don’t change because we’re on the cloud. To do this in a mindful way, especially in a large organization, we need to create some oversight and governance, building infrastructure that allows us to make the right decisions.”
Innovation and the future of the cloud
Increasingly, businesses are developing innovations that wouldn’t necessarily be possible without the cloud: enabling fintechs to get up and running faster and offer individualized services, which has encouraged a revolution in financial services. This shift is undoubtedly broadening the competitive landscape.
“Agility is a key reason we’re seeing this movement to the cloud,” says Van Nuys. “Companies are able to harness resources as they need them, and that’s a way to develop, test, and roll out new applications faster, and in a more secure environment. The ability to innovate and experiment easily is also key.”
Bigger banks are moving at a more rapid pace and sharing data like startups in the industry. Since cloud technology offers companies more options with less risk, as well as more experimentation and invention on behalf of customers, it’s possible to explore alternative data sets and spend time and capital on proprietary analysis.
On a larger scale, the panelists concurred that the cloud has the potential to globalize the way we consider technology. With local computing capacity in place almost everywhere, public cloud providers like Amazon Web Services can give companies the ability to vastly expand their reach in minutes.
When event attendees were asked what percentage of their application suites would be running in the cloud by 2022, 53% answered 80% or more. In predicting where the technology is going, the panelists were in agreement on the migration and adoption of the cloud.
“Ultimately, the cloud makes the procurement of new software and solutions a lot easier within fintech,” says Ha. “Now, it’s so easy for companies to have their data within cloud storage, so the speed with which they can adopt technology provides a significant advantage.”